The world has been focused on news from Ukraine over the past week and it’s easy to see why. For the first time, we are witnessing a war as it unfolds. The Vietnam War is known as the first televised war: I remember as a child watching reporters interview American soldiers in the field during nightly newscasts. And during the Iraq war, we saw “embedded” journalists traveling alongside troops as they crossed the Iraqi desert towards Baghdad. But today, technology has allowed us to observe in real time an unprovoked invasion of an independent country: on the first day of the war, Google Maps would have shown the movement of Russian tank units because Google wanted to alert the traffic jam drivers.
Yes, in real time, we can follow tweets and Facebook posts and even have LinkedIn conversations with Ukrainians who witnessed the fall of missiles and the destruction of buildings. A staff member of a major Ukrainian law firm told me in a Linkedin conversation on the first day of the invasion: “We remain calm, strong, trust our army and the international community, and always hope for the good.
And the international community, both legal and political, reacted, with sanctions and offers of voluntarily representation. Will this be enough to repel the Russian occupation of Kiev? Most experts say it’s unlikely. For obvious reasons, Ukrainian and international law firms, including Baker McKenzie, CMS and Dentons, have closed their offices in Kiev for the time being. But these global companies say they are still working remotely and helping their Ukrainian employees in any way they can, including helping them relocate to neighboring countries.
And they are not alone.
The humanitarian and refugee crisis is staggering, as hundreds of thousands of women and children have already fled to Western countries and the EU expects up to four million more. Some major US law firms have stepped upincluding Ropes & Gray, Akin Gump Strauss Hauer & Feld, and Paul, Weiss, Rifkind, Wharton & Garrison, saying they are preparing to provide legal assistance voluntarily.
But help isn’t just coming from Global 200 law firms. KNP Law, a 20-plus year-old law firm based in Budapest, for example, is on the front line at the border helping Ukrainians and offers its services, voluntarily, to help refugees settle in Hungary or other countries. It is also establish an international network of lawyers ready to support, voluntarily, Ukrainian clients seeking asylum or immigration assistance. The firm says it has already received interest and commitment from more than 500 international lawyers, but is also seeking help from major law firms to help prepare applications and resettle displaced Ukrainians. You can register here.
And then there are the penalties. Many experts have said that the outcome of this war, at least in the long term, will depend on the response of the global community. That’s why Timur Bondaryev, the founder and managing partner of Arzinger, one of Ukraine’s most prestigious companies, called on the world community to actively help his country. The invasion, he said, “is not just about our country but about global security.”
The world reacts. Sanctions have been put in place against Russian oligarchs suspected of being close to Russian President Vladimir Putin, as well as Putin himself. They have also been imposed on major Russian banks, an effort intended to cut off the country from Western funding. The United States is also freezing trillions of dollars in Russian assets. Some Russian companies, including the Russian state-controlled energy company that owns Nord Stream 2, the not-yet-operational gas pipeline between Russia and Germany, have also been sanctioned. The EU said it would ban transactions with the Russian Central Bank.
In addition, countries exclude Russia from the SWIFT system which facilitates international financial transactions. Norway’s $1.3 trillion sovereign wealth fund has announced plans to freeze its assets in Russia and divest from the Russian market. European countries fund the supply of arms to Ukraine and have banned all Russian planes, including commercial planes and loaded private jets, from all EU airspace. British oil giant BP, which has worked in Russia for more than 30 years, said it would divest its 20% stake in the state-controlled Russian oil company, although the move is expected to have a negative impact on its bottom line . And the penalties follow.
Meanwhile, like BP, companies doing business in Russia are feeling the impact of sanctions and seeking advice from lawyers who specialize in sanctions and foreign trade practices. Some say they have been inundated with customer calls to help them assess the situation and their potential risk exposure. “Things change very quickly,” Adam Smith, international trade compliance attorney at Gibson Dunn & Crutcher, told reporter Bruce Love last week, adding that even customers who don’t trade directly in Russia are looking for advice – or if they don’t, they should be.
And what about foreign law firms – and companies – in Russia? In an interview with correspondent Anne Bagamery, Armando Ambrosio, resident partner in the Moscow office of Italian law firm De Berti Jacchia Franchini Forlani Studio Legale, which provides legal, tax and advisory services to Italian and Russian clients, discussed the business outlook in Russia under growing sanctions list. Ambrosio said he expected there will be many obstacles to do business in Russia, in particular because of financial sanctions. Customers are scared. Some pending projects are likely to be delayed, and at some point some companies – and international law firms – may decide to close their doors in Russia if the situation becomes too difficult, he said.
Isn’t that the purpose of the sanctions: to hamper the Russian economy? May be. But the other question is, does Putin care.
Other news—Where to grow?
Meanwhile, international law firms continue to seek markets where they can increase profitability and grow. It has become increasingly clear over the past week that the two markets that are catching their attention are the United States and Asia.
British companies have been looking for opportunities in the US, and last week Simmons & Simmons announced the opening of its first US office in Silicon Valley, hiring the head of Osborne Clarke’s Silicon Valley office for its launch, a specialist in data privacy, cybersecurity and technology law. The move follows that of other UK-based companies, Freshfields Bruckhaus Deringer and Allen & Overy, which have also expanded to the US West Coast in recent years.
Allen & Overy, Meanwhile, announced last week that it is hiring five Goodwin Procter partners for its U.S. intellectual property litigation firm, a move that will give the firm an office in Boston. The Boston office could fit well with the company’s recent expansion into California because it connects its technology and life sciences practices, US managing partner Tim House told reporter Dan Packel.
Breaking into the US market is neither easy nor cheap, however, and the costly, but potentially lucrative cost of entering the market has become apparent as Freshfields Bruckhaus Deringer and Linklaters both said they matched the most recent increase in the pay scale for associates of its U.S. attorneys. The new pay scale, part of the ongoing pay war for US law firms, gave senior partners another pay raise.
But it is perhaps in Asia-Pacific that the growth potential of the legal market is greatest, at least for companies that play their hands well. And several global law firms made it clear last week that they hoped to position themselves for growth in the region.
While discussing the US company’s 2021 corporate financials O’Melveny & Myers, which posted gross revenues of a record $911 million, O’Melveny Chairman Bradley Butwin said the firm’s Asian capital markets practice, which has managed nine IPOs in the Hong Kong stock market last year might have been among the company’s busiest. The company also expanded its corporate capabilities in China and added two top M&A lawyers in South Korea, he said.
McDermott Will & Emery, which broke the $3 million profit-per-partner mark and saw its revenue cross the $1.5 billion mark for the first time, also pinned its hopes on Asia, the chairman said from the firm Ira Coleman to journalist Patrick Smith. McDermott had closed its Seoul office in 2019 and its mainland China office in 2020, but it relaunched last year with an office in Singapore, where its practice areas and expertise are more closely aligned with the core practices of the company. McDermott office in Singapore has since hired several associates and lawyers.
And then there is Herbert Smith Freehills, whose strategy for the next five years largely focuses on the company’s Asian business, company CEO Justin D’Agostino told reporter Hannah Walker. The company has eight offices in Asia, as well as four affiliates and associations, and its business in Asia currently accounts for approximately 14% of company revenue. By 2025, D’Agostino said he and the rest of HSF’s senior management want to see that increase to at least 20%. “So much work comes out and goes into APAC,” he said.
That’s not to say it’s getting easier to do business in Asia. In Hong Kong, international law firms are quietly reassessing their business strategies due to China’s growing control over Hong Kong. And now that Hong Kong has imposed dramatic COVID restrictions on residents as it faces a surge in cases that overwhelms hospitals, even According to Jessica Seah of Law.com International, more expatriate lawyers will leave Hong Kong and not return, which will further deplete the talent pool.
I invite you to read Jess Asia legal briefing of last week. She called it “Hard Truths” – an apt name and a painful reminder of everything going on in the world.